Debt Wish

Debt Wish: Entrepreneurial Cities, U.S. Federalism, and Economic Development

Alberta M. Sbragia
Copyright Date: 1996
Pages: 312
  • Cite this Item
  • Book Info
    Debt Wish
    Book Description:

    Albert Sbragia considers American urban government as an investor whether for building infrastructure or supporting economic development. Over time, such investment has become disconnected from the normal political and administrative processes of local policymaking through the use of special public spending authorities like water and sewer commissions and port, turnpike, and public power authorities.

    Sbragia explores how this entrepreneurial activity developed and how federal and state policies facilitated or limited it. She also analyzes the implications of cities creating innovative, special-purpose quasi-governments to circumvent and dilute state control over city finances, diluting their own authority in the process.

    eISBN: 978-0-8229-7174-0
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-xii)
  4. Chapter 1 Introduction
    (pp. 1-18)

    This book is about urban government as borrower and investor. Whether building infrastructure or supporting economic development, city officials historically have borrowed money and invested it. In fact, “the vital services at the heart of urban rule” depend on such capital investment.¹ Public power has mobilized private money for public purposes. Over time, such investment has become disconnected from the normal political and administrative processes of local policy making. A great deal of local government investment now takes place in an institutional world that differs significantly from the picture of urban politics and government presented in textbooks. This book addresses...

  5. Chapter 2 State Governments as Entrepreneurs
    (pp. 19-43)

    Public capital investment in the United States, from a historical viewpoint, was distinctive both because it was locally rather than nationally driven and because it was entrepreneurial in ambition. The provision of canals and railroads—called “internal improvements” by nineteenth-century commentators—differed dramatically in the United States and Great Britain.¹ That difference helps explain why American local governments have been active both in economic development and in service provision whereas British localities have been primarily concerned with the latter.

    The autonomous, entrepreneurial role played by American subnational governments in the provision of transportation networks crucial for the industrial and commercial...

  6. Chapter 3 Cities as Investors
    (pp. 44-61)

    The restriction of state borrowing was significant in that it removed the state from actively promoting transportation while it opened the door for local entrepreneurship. Local governments, which were unrestricted in their borrowing, emulated the earlier state activism. Economic development became a major priority for the local governments, just as it had been for the states. They too were spurred on by competition, and by the realization that to lose out in the transportation race could mean actual extinction. Nineteenth-century cities’ investment activities in the area of economic development were an important building block in the construction of the system...

  7. Chapter 4 The Provision of Services: Municipal Government, Technology, and Debt
    (pp. 62-79)

    The American locality is distinctive because it has been active in both economic development and service provision. Capital finance is directed toward both activities, and the two have frequently been intertwined. In the nineteenth and early twentieth centuries, a symbiotic relationship existed in many cities between efforts at economic development and the provision of capital-intensive services. Debts incurred for economic development often constrained the provision of services in a subsequent period. Partially because of the debts Milwaukee incurred in its attempt to better Chicago as a railway center, for example, services were provided relatively slowly.¹

    Other cities provided a low...

  8. Chapter 5 The Institutionalization of Limits
    (pp. 80-101)

    The municipality, understood as borrower and investor, underwent a definitive transformation in the last quarter of the nineteenth century. How much could the municipality borrow? The state government answered that question. What was its legal status? The judicial system, which viewed the private sector as needing protection and government as needing to be restrained, decided the municipality was a public (as opposed to a private) corporation. Where did it fit in the government hierarchy? Judge Dillon answered that question. What could it borrow for? The U.S. Supreme Court set those limits. By the end of the century local government as...

  9. Chapter 6 Circumvention by Law and Market
    (pp. 102-134)

    Local governments in the twentieth century faced the task of investing within a complex framework of limitations constructed by state government, state courts, and the Supreme Court. Their response was to develop mechanisms—legal, financial, and organizational—that would allow them to circumvent these limitations. Given that these restrictions were intended to restrain local borrowing, local officials who wished to borrow at higher levels than those permitted had to find ways to honor the letter of the law while violating its spirit. This chapter analyzes one strategy devised by officials, and chapter 7 analyzes a complementary strategy. The combination of...

  10. Chapter 7 Circumvention by Law and Government
    (pp. 135-162)

    Circumventing state limits, however, required more than the development of the revenue bond. It also required the construction of a new governmental entity. Whereas the special district had been a nineteenth-century mechanism for evading state debt limits, the public authority was to prove to be a favorite of the twentieth century. The debt restrictions that state governments had placed on municipal governments could be evaded by creating self-financing special-purpose governments whose debt was treated differently from the debt incurred by general-purpose governments. The creation of such governments was a critical part of the two-pronged strategy that made up the intergovernmental...

  11. Chapter 8 Local Entrepreneurship via Tax Exemption
    (pp. 163-187)

    The combination of the revenue bond and the public authority created new options for local officials. The municipal government could use general-obligation debt for those capital-intensive services that did not generate revenue, while creating authorities financed by revenue bonds to deliver revenue-producing services. The intent of state debt limits could successfully be evaded by pyramiding debt across different local governments. Local officials began to take up their new options with particular vigor in the 1970s. The use of traditional general-obligation debt declined, and the role of the municipality as an investor also diminished. The institutional world of capital investment gradually...

  12. Chapter 9 Washington Takes Control
    (pp. 188-209)

    The explosion of tax-exempt borrowing for purposes not linked to the provision of infrastructure in the 1970s and the early 1980s put the issue of local government borrowing on the congressional agenda.¹ Congress worried about the loss of federal tax revenue as well as the purposes for which tax-exempt borrowing was being used. It responded by passing the Tax Reform Act of 1986 (TRA), which significantly reshaped the system of local capital investment. Washington became more important as a political actor because it intervened to restrict local initiative—and because the Supreme Court ruled that the tax exemption was a...

  13. Chapter 10 Conclusion
    (pp. 210-222)

    Each American government moves through a universe made up of tens of thousands of other governments. Each of these governments has, in Fritz Scharpf’s term, an “institutional self-interest” that is defended, enhanced, and pursued vis-à-vis other governments.¹ When governments pursue their institutional self-interests, they are engaging in politics. They are political actors in that universe.

    The interest of a government as an institution can be pursued in various ways, each of which has its own appeal. In financing public works and economic development, local governments have used the strategy of circumvention to increase their discretion and flexibility. The price of...

  14. Notes
    (pp. 223-264)
  15. Bibliography
    (pp. 265-288)
  16. Index
    (pp. 289-296)